E.U. says Meta’s ‘pay or consent’ ads violate competition law

The preliminary findings come as part of a longer investigation into whether the social media giant is out of compliance with the E.U.’s Digital Markets Act, or DMA, the first antitrust law focused on Big Tech companies in a major economy. Meta could face fines of as much as 10 percent of its annual global revenue if the commission upholds the stance in its final decision.

The E.U. said that Meta’s requirement for users to pay if they don’t want personalized ads does not allow them the right to freely consent to the use of their personal data, and that the company has failed to offer them an equivalent service using less of their personal data, as required under the DMA.

Meta said in a statement that it believes its “subscription for no ads” model complies with the DMA.

“We look forward to further constructive dialogue with the European Commission to bring this investigation to a close,” the company said.

The DMA fully went into effect in March, with proponents hailing it as a landmark law that would keep big internet companies from abusing their market power to the detriment of consumers. Critics warned that overregulation of the internet sector will result in a chilling effect on innovation.

Since then, E.U. regulators have moved swiftly. The same month that the DMA took effect, the E.U. opened probes into Apple, Meta and Alphabet, with a time limit of a year for the investigations to be completed.

Meta had introduced the pay-or-consent choice for ads in the E.U. market in November, in a show to E.U. regulators that it was complying with the requirements of the DMA to allow users control over how their personal data is used. Regulators were apparently not convinced.

The E.U. has also informed Apple and Microsoft in recent days that their business practice are in violation of antitrust rules.